UGI Corp Q3 6.30.2012 10-Q
Table of Contents

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ________ to ________            
Commission file number 1-11071

UGI CORPORATION
(Exact name of registrant as specified in its charter)
 
Pennsylvania
 
23-2668356
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
460 North Gulph Road, King of Prussia, PA
 
19406
(Address of principal executive offices)
 
(Zip Code)
(610) 337-1000
(Registrant’s telephone number, including area code)
______________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
ý
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
At July 31, 2012, there were 112,467,512 shares of UGI Corporation Common Stock, without par value, outstanding.
 
 
 
 
 


Table of Contents

UGI CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
 
 
PAGES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
53 
 
 
 
 
Exhibit 10.1
 
Exhibit 31.1
 
Exhibit 31.2
 
Exhibit 32
 
  EX-101 INSTANCE DOCUMENT
 
  EX-101 SCHEMA DOCUMENT
 
  EX-101 CALCULATION LINKBASE DOCUMENT
 
  EX-101 LABELS LINKBASE DOCUMENT
 
  EX-101 PRESENTATION LINKBASE DOCUMENT
 
 

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Table of Contents


CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Millions of dollars)
 
 
June 30,
2012
 
September 30,
2011
 
June 30,
2011
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
436.5

 
$
238.5

 
$
317.8

Restricted cash
 
7.6

 
17.2

 
10.2

Accounts receivable (less allowances for doubtful accounts of $45.7, $36.8 and $45.0, respectively)
 
624.9

 
546.7

 
595.7

Accrued utility revenues
 
15.0

 
14.8

 
7.4

Inventories
 
317.3

 
363.0

 
271.6

Deferred income taxes
 
52.3

 
44.9

 
26.8

Utility regulatory assets
 
2.7

 
8.6

 
2.0

Derivative financial instruments
 
21.6

 
10.2

 
10.5

Prepaid expenses and other current assets
 
59.4

 
62.2

 
48.2

Total current assets
 
1,537.3

 
1,306.1

 
1,290.2

Property, plant and equipment, at cost (less accumulated depreciation and amortization of $2,226.8, $2,080.0 and $2,077.1, respectively)
 
4,188.9

 
3,204.5

 
3,216.8

Goodwill
 
2,756.0

 
1,562.2

 
1,612.0

Intangible assets, net
 
717.7

 
147.8

 
159.5

Other assets
 
452.3

 
442.7

 
395.2

Total assets
 
$
9,652.2

 
$
6,663.3

 
$
6,673.7

LIABILITIES AND EQUITY
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Current maturities of long-term debt
 
$
86.1

 
$
47.4

 
$
38.5

Bank loans
 
187.3

 
138.7

 
206.1

Accounts payable
 
346.0

 
399.6

 
338.7

Derivative financial instruments
 
116.5

 
49.7

 
21.2

Other current liabilities
 
577.4

 
442.5

 
430.4

Total current liabilities
 
1,313.3

 
1,077.9

 
1,034.9

Long-term debt
 
3,475.1

 
2,110.3

 
2,039.5

Deferred income taxes
 
832.8

 
709.2

 
678.3

Deferred investment tax credits
 
4.7

 
5.0

 
5.0

Other noncurrent liabilities
 
589.5

 
569.8

 
535.1

Total liabilities
 
6,215.4

 
4,472.2

 
4,292.8

Commitments and contingencies (note 11)
 

 

 

Equity:
 
 
 
 
 
 
UGI Corporation stockholders’ equity:
 
 
 
 
 
 
UGI Common Stock, without par value (authorized—300,000,000 shares; issued — 115,623,094, 115,507,094 and 115,507,094 shares, respectively)
 
1,148.8

 
937.4

 
934.9

Retained earnings
 
1,211.2

 
1,085.8

 
1,137.3

Accumulated other comprehensive (loss) income
 
(77.7
)
 
(17.7
)
 
67.6

Treasury stock, at cost
 
(24.3
)
 
(27.8
)
 
(28.6
)
Total UGI Corporation stockholders’ equity
 
2,258.0

 
1,977.7

 
2,111.2

Noncontrolling interests, principally in AmeriGas Partners
 
1,178.8

 
213.4

 
269.7

Total equity
 
3,436.8

 
2,191.1

 
2,380.9

Total liabilities and equity
 
$
9,652.2

 
$
6,663.3

 
$
6,673.7

See accompanying notes to condensed consolidated financial statements.

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Table of Contents
UGI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(Millions of dollars, except per share amounts)
 
 
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
 
2012
 
2011
 
2012
 
2011
Revenues
 
$
1,277.2

 
$
1,105.4

 
$
5,393.5

 
$
5,052.0

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of sales (excluding depreciation shown below)
 
810.2

 
731.0

 
3,438.6

 
3,317.5

Operating and administrative expenses
 
405.8

 
304.3

 
1,191.5

 
966.4

Utility taxes other than income taxes
 
3.9

 
3.6

 
12.9

 
13.4

Depreciation
 
69.5

 
50.8

 
191.0

 
149.0

Amortization
 
15.1

 
7.0

 
36.7

 
19.6

Other income, net
 
(8.1
)
 
(8.5
)
 
(27.1
)
 
(40.4
)
 
 
1,296.4

 
1,088.2

 
4,843.6

 
4,425.5

Operating (loss) income
 
(19.2
)
 
17.2

 
549.9

 
626.5

Loss from equity investees
 
(0.1
)
 
(0.2
)
 
(0.2
)
 
(0.8
)
Gain (loss) on extinguishments of debt
 
0.1

 

 
(13.3
)
 
(18.8
)
Interest expense
 
(61.3
)
 
(35.0
)
 
(162.6
)
 
(102.6
)
(Loss) income before income taxes
 
(80.5
)
 
(18.0
)
 
373.8

 
504.3

Income tax benefit (expense)
 
4.0

 
4.5

 
(113.2
)
 
(147.2
)
Net (loss) income
 
(76.5
)
 
(13.5
)
 
260.6

 
357.1

Less: net (loss) income attributable to noncontrolling interests, principally in AmeriGas Partners
 
70.2

 
6.3

 
(46.5
)
 
(101.8
)
Net (loss) income attributable to UGI Corporation
 
$
(6.3
)
 
$
(7.2
)
 
$
214.1

 
$
255.3

(Loss) earnings per common share attributable to UGI stockholders:
 
 
 
 
 
 
 
 
Basic
 
(0.06
)
 
(0.06
)
 
1.90

 
2.29

Diluted
 
(0.06
)
 
(0.06
)
 
1.89

 
2.26

Average common shares outstanding (thousands):
 
 
 
 
 
 
 
 
Basic
 
112,726

 
112,020

 
112,484

 
111,515

Diluted
 
112,726

 
112,020

 
113,295

 
113,046

Dividends declared per common share
 
0.27

 
0.26

 
0.79

 
0.76

See accompanying notes to condensed consolidated financial statements.


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Table of Contents
UGI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(Millions of dollars)
 
 
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
 
2012
 
2011
 
2012
 
2011
Net (loss) income
 
$
(76.5
)
 
$
(13.5
)
 
$
260.6

 
$
357.1

Net (losses) gains on derivative instruments (net of tax of $9.3, $6.2, $48.6 and $(6.9), respectively)
 
(63.2
)
 
(10.8
)
 
(143.9
)
 
25.6

Reclassifications of net losses (gains) on derivative instruments (net of tax of $(9.5) $(1.5), $(31.3) and $(18.5), respectively)
 
24.8

 
(2.9
)
 
69.5

 
11.0

Foreign currency adjustments (net of tax of $11.2, $(2.8), $9.7 and $(8.8), respectively)
 
(35.6
)
 
13.2

 
(33.9
)
 
37.8

Benefit plans (net of tax of $0.0, $0.0, $(0.2) and $(1.4), respectively)
 
0.1

 

 
0.3

 
2.1

Comprehensive (loss) income
 
(150.4
)
 
(14.0
)
 
152.6

 
433.6

Less: comprehensive (loss) income attributable to noncontrolling interests, principally in AmeriGas Partners
 
107.3

 
10.8

 
(0.4
)
 
(100.6
)
Comprehensive (loss) income attributable to UGI Corporation
 
$
(43.1
)
 
$
(3.2
)
 
$
152.2

 
$
333.0

See accompanying notes to condensed consolidated financial statements.


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Table of Contents
UGI CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Millions of dollars)
 
 
Nine Months Ended
June 30,
 
 
2012
 
2011
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Net income
 
$
260.6

 
$
357.1

Reconcile to net cash from operating activities:
 
 
 
 
Depreciation and amortization
 
227.7

 
168.6

Deferred income taxes, net
 
9.9

 
24.8

Provision for uncollectible accounts
 
21.3

 
19.8

Net change in realized gains and losses deferred as cash flow hedges
 
(11.7
)
 
13.8

Loss on extinguishments of debt, net
 
13.3

 
18.8

Other, net
 
2.6

 
18.4

Net change in:
 
 
 
 
Accounts receivable and accrued utility revenues
 
71.2

 
(93.1
)
Inventories
 
128.1

 
56.7

Utility deferred fuel costs
 
8.1

 
33.0

Accounts payable
 
(132.2
)
 
(51.3
)
Other current assets
 
22.8

 
(6.8
)
Other current liabilities
 
(55.5
)
 
(92.6
)
Net cash provided by operating activities
 
566.2

 
467.2

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
Expenditures for property, plant and equipment
 
(236.0
)
 
(245.3
)
Acquisitions of businesses, net of cash acquired
 
(1,573.7
)
 
(49.6
)
Decrease in restricted cash
 
9.6

 
24.6

Other
 
0.1

 
(1.7
)
Net cash used by investing activities
 
(1,800.0
)
 
(272.0
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
Dividends on UGI Common Stock
 
(88.7
)
 
(84.7
)
Distributions on AmeriGas Partners Common Units
 
(126.5
)
 
(69.7
)
Issuances of debt
 
1,550.4

 
981.5

Repayments of debt
 
(240.1
)
 
(987.3
)
Increase in bank loans
 
31.0

 
5.4

Receivables Facility net borrowings (repayments)
 
18.9

 
(12.1
)
Issuances of UGI Common Stock
 
12.7

 
24.9

Issuance of AmeriGas Partners Common Units
 
276.6

 

Other
 
0.5

 
3.4

Net cash provided (used) by financing activities
 
1,434.8

 
(138.6
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
 
(3.0
)
 
0.5

Cash and cash equivalents increase
 
$
198.0

 
$
57.1

Cash and cash equivalents:
 
 
 
 
End of period
 
$
436.5

 
$
317.8

Beginning of period
 
238.5

 
260.7

Increase
 
$
198.0

 
$
57.1

See accompanying notes to condensed consolidated financial statements.

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Table of Contents
UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)


1.
Nature of Operations

UGI Corporation (“UGI”) is a holding company that, through subsidiaries and affiliates, distributes and markets energy products and related services. In the United States, we own and operate (1) a retail propane marketing and distribution business; (2) natural gas and electric distribution utilities; (3) electricity generation facilities; and (4) an energy marketing, midstream infrastructure, storage and energy services business. Internationally, we market and distribute propane and other liquefied petroleum gases (“LPG”) in Europe and China. We refer to UGI and its consolidated subsidiaries collectively as “the Company” or “we.”
We conduct a domestic propane marketing and distribution business through AmeriGas Partners, L.P. (“AmeriGas Partners”), a publicly traded limited partnership, and its principal operating subsidiary AmeriGas Propane, L.P. (“AmeriGas OLP”), and beginning January 12, 2012, also through AmeriGas OLP’s principal operating subsidiaries Heritage Operating, L.P. (“HOLP”) and Titan Propane LLC (“Titan LLC”). AmeriGas OLP, HOLP and Titan LLC are collectively referred to herein as the “Operating Partnerships.” On January 12, 2012, AmeriGas Partners completed the acquisition of the subsidiaries of Energy Transfer Partners, L.P., a Delaware limited partnership (“ETP”), that operated ETP’s propane distribution business (“Heritage Propane”) (see Note 4, “Partnership Acquisition of Heritage Propane”). AmeriGas Partners, AmeriGas OLP and HOLP are Delaware limited partnerships, and Titan LLC is a Delaware limited liability company. UGI’s wholly owned second-tier subsidiary, AmeriGas Propane, Inc. (the “General Partner”), serves as the general partner of AmeriGas Partners and AmeriGas OLP. We refer to AmeriGas Partners and its subsidiaries together as the "Partnership” and the General Partner and its subsidiaries, including the Partnership, as “AmeriGas Propane.” At June 30, 2012, the General Partner held a 1% general partner interest and 25.4% limited partner interest in AmeriGas Partners and an effective 27.1% ownership interest in AmeriGas OLP. Our limited partnership interest in AmeriGas Partners comprises 23,756,882 AmeriGas Partners Common Units (“Common Units”). The remaining 73.6% interest in AmeriGas Partners comprises 39,460,280 publicly held Common Units and 29,567,362 Common Units held by ETP as a result of the acquisition of Heritage Propane. On August 1, 2012, Titan LLC merged with and into AmeriGas OLP.
Our wholly owned subsidiary, UGI Enterprises, Inc. (“Enterprises”), through subsidiaries (1) conducts LPG distribution businesses in France and, subsequent to the Shell Acquisition described below, in Belgium, the Netherlands and Luxembourg (collectively “Antargaz”); (2) conducts LPG distribution businesses in 11 central and eastern European countries including, subsequent to the Shell Acquisition, Norway, Sweden and Finland (collectively referred to as “Flaga”); (3) conducts an LPG distribution business in the United Kingdom subsequent to the Shell Acquisition; and (4) conducts an LPG distribution business in the Nantong region of China. On October 14, 2011, UGI, through subsidiaries, acquired Shell’s LPG distribution businesses in the United Kingdom, Belgium, the Netherlands, Luxembourg, Denmark, Finland, Norway and Sweden for approximately €133.6 ($179.0) in cash (the “Shell Acquisition”). We refer to our foreign LPG operations collectively as “International Propane.” Enterprises, through UGI Energy Services, Inc. (“Energy Services”) and its subsidiaries, conducts an energy marketing, midstream infrastructure, storage and energy services business primarily in the Mid-Atlantic region of the United States. In addition, Energy Services’ wholly owned subsidiary, UGI Development Company (“UGID”), owns all or a portion of electric generation facilities located in Pennsylvania. The businesses of Energy Services and its subsidiaries, including UGID, are referred to herein collectively as “Midstream & Marketing.” Enterprises also conducts heating, ventilation, air-conditioning, refrigeration and electrical contracting businesses in the Mid-Atlantic region through first-tier subsidiaries (“HVAC/R”).
 
Our natural gas and electric distribution utility businesses are conducted through our wholly owned subsidiary UGI Utilities, Inc. (“UGI Utilities”) and its subsidiaries UGI Penn Natural Gas, Inc. (“PNG”) and UGI Central Penn Gas, Inc. (“CPG”). UGI Utilities, PNG and CPG own and operate natural gas distribution utilities in eastern, northeastern and central Pennsylvania and in a portion of one Maryland county. UGI Utilities also owns and operates an electric distribution utility in northeastern Pennsylvania (“Electric Utility”). UGI Utilities’ natural gas distribution utility is referred to as “UGI Gas;” PNG’s natural gas distribution utility is referred to as “PNG Gas;” and CPG’s natural gas distribution utility is referred to as “CPG Gas.” UGI Gas, PNG Gas and CPG Gas are collectively referred to as “Gas Utility.” Gas Utility is subject to regulation by the Pennsylvania Public Utility Commission (“PUC”) and, with respect to a small service territory in one Maryland county, the Maryland Public Service Commission, and Electric Utility is subject to regulation by the PUC. Gas Utility and Electric Utility are collectively referred to as “Utilities.”
 

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Table of Contents
UGI CORPORATION AND SUBSIDIARIES


2.
Significant Accounting Policies

Our condensed consolidated financial statements include the accounts of UGI and its controlled subsidiary companies which, except for the Partnership, are majority owned. We eliminate all significant intercompany accounts and transactions when we consolidate. We report the public’s and ETP’s limited partner interests in the Partnership and the outside ownership interests in certain subsidiaries of Antargaz and Flaga as noncontrolling interests. Entities in which we do not have control but have significant influence over operating and financial policies are accounted for by the equity method.
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). They include all adjustments that we consider necessary for a fair statement of the results for the interim periods presented. Such adjustments consisted only of normal recurring items unless otherwise disclosed. The September 30, 2011 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). These financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the year ended September 30, 2011 (“Company’s 2011 Annual Financial Statements and Notes”). Due to the seasonal nature of our businesses, the results of operations for interim periods are not necessarily indicative of the results to be expected for a full year.
Restricted Cash. Restricted cash represents those cash balances in our commodity futures and option brokerage accounts that are restricted from withdrawal.
Earnings Per Common Share. Basic earnings per share attributable to UGI Corporation shareholders reflect the weighted-average number of common shares outstanding. Diluted earnings per share attributable to UGI Corporation include the effects of dilutive stock options and common stock awards.
 
Shares used in computing basic and diluted earnings per share are as follows:
 
 
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
 
2012
 
2011
 
2012
 
2011
Denominator (thousands of shares):
 
 
 
 
 
 
 
 
Average common shares outstanding for basic computation
 
112,726

 
112,020

 
112,484

 
111,515

Incremental shares issuable for stock options and awards
 

 

 
811

 
1,531

Average common shares outstanding for diluted computation
 
112,726

 
112,020

 
113,295

 
113,046

Comprehensive Income. Comprehensive income (loss) comprises net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) principally comprises (1) gains and losses on derivative instruments qualifying as cash flow hedges, net of reclassifications to net income; (2) actuarial gains and losses on postretirement benefit plans, net of associated amortization; and (3) foreign currency translation and intracompany transaction adjustments.
Reclassifications. We have reclassified certain prior-year period balances to conform to the current-period presentation.
Income Taxes. During the three months ended December 31, 2011, the Company changed the U.S. tax status of a foreign entity. As a result of the change in tax status, we now believe it is more likely than not that a portion of our foreign tax credits will be utilized and, accordingly, adjusted our foreign tax credit valuation allowance which reduced income tax expense by $4.7 for the nine months ended June 30, 2012.
As a result of the completion of the audit of the Company’s 2009 federal income tax return, during the nine months ended June 30, 2012, the Company adjusted its unrecognized tax benefits, which amount was not material.
Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make estimates

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Table of Contents
UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)

and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and costs. These estimates are based on management’s knowledge of current events, historical experience and various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may be different from these estimates and assumptions.
 
3.
Accounting Changes

Adoption of New Accounting Standards
Goodwill Impairment. In September 2011, the Financial Accounting Standards Board (“FASB”) issued guidance on testing goodwill for impairment. The new guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test in GAAP. Previous guidance required an entity to test goodwill for impairment at least annually by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit is less than the carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if any. Under the new guidance, an entity is not required to calculate fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The new guidance does not change how goodwill is calculated or assigned to reporting units, nor does it revise the requirements to test goodwill annually for impairment. The new guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 with early adoption permitted. We adopted the new guidance for Fiscal 2012.
Fair Value Measurements. In May 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-04, “Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRS.” The amendments result in common fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards (“IFRS”). The new guidance applies to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, liability or an instrument classified in shareholders’ equity. Among other things, the new guidance requires quantitative information about unobservable inputs, valuation processes and sensitivity analysis associated with fair value measurements categorized within Level 3 of the fair value hierarchy. The new guidance became effective for our interim period ending March 31, 2012 and is required to be applied prospectively. The adoption of this accounting guidance did not have a material impact on our financial statements.
New Accounting Standards Not Yet Adopted
Indefinite-Lived Intangible Asset Impairment. In July 2012, the FASB issued guidance on testing indefinite-lived intangible assets, other than goodwill, for impairment. The new guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If the entity determines on the basis of qualitative factors that the fair value of the indefinite-lived intangible asset is not more likely than not impaired, the entity would not need to calculate the value of the asset. The new guidance does not revise the requirement to test indefinite-lived intangible assets annually for impairment. In addition, the new guidance does not amend the requirement to test these assets for impairment between annual tests if there is a change in events or circumstances. The new guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 with early adoption permitted. We plan on adopting the new guidance in the fourth quarter of Fiscal 2012.
Disclosures about Offsetting Assets and Liabilities. In December 2011, the FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities.” The amendments in ASU 2011-11 require an entity to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on its financial position. The amendments will enhance disclosures by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with other GAAP or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the balance sheet. The new guidance is effective for annual reporting periods beginning on or after January 1, 2013 (Fiscal 2014) and interim periods within those annual periods. We are currently evaluating the impact of the new guidance on our future disclosures.

4.
Partnership Acquisition of Heritage Propane

On January 12, 2012 (the “Acquisition Date”), AmeriGas Partners completed the acquisition of Heritage Propane from ETP

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Table of Contents
UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)

for total consideration of $2,598.2 comprising $1,465.6 in cash and 29,567,362 AmeriGas Partners Common Units with a fair value of approximately $1,132.6 (the “Heritage Acquisition”). The Acquisition Date cash consideration for the Heritage Acquisition was subject to purchase price adjustments based on working capital, cash and the amount of indebtedness of Heritage Propane (“Working Capital Adjustment”) and certain excess sales proceeds resulting from ETP's sale of HOLP's former cylinder exchange business (“HPX”). In April 2012, AmeriGas Partners paid $25.5 of additional cash consideration as a result of the Working Capital Adjustment and in June 2012, AmeriGas Partners received $18.9 in cash representing the excess cash proceeds from the sale of HPX. The Heritage Acquisition was consummated pursuant to a Contribution and Redemption Agreement dated October 15, 2011, as amended (the “Contribution Agreement”), by and among AmeriGas Partners, ETP, Energy Transfer Partners GP, L.P., the general partner of ETP (“ETP GP”), and Heritage ETC, L.P. (the “Contributor”). The acquired business conducts its propane operations in 41 states through HOLP and Titan LLC. According to LP-Gas Magazine rankings published on February 1, 2012, Heritage Propane was the third largest retail propane distributor in the United States, delivering over 500 million gallons to more than one million retail propane customers in 2011. The Heritage Acquisition is consistent with our growth strategies, one of which is to grow our core business through acquisitions.
Pursuant to the Contribution Agreement, the Contributor contributed to AmeriGas Partners a 99.999% limited partner interest in HOLP; a 100% membership interest in Heritage Operating GP, LLC, a Delaware limited liability company and a holder of a 0.001% general partner interest in HOLP; a 99.99% limited partner interest in Titan Energy Partners, L.P., a Delaware limited partnership and the sole member of Titan LLC; and a 100% membership interest in Titan Energy GP, L.L.C., a Delaware limited liability company and holder of a 0.01% general partner interest in Titan Energy Partners, L.P. As a result of the Heritage Acquisition, the General Partner, in order to maintain its general partner interests in AmeriGas Partners and AmeriGas OLP, contributed 934,327 Common Units to the Partnership having a fair value of $41.7. These Common Units were subsequently cancelled.
The cash portion of the Heritage Acquisition was financed by the issuance by AmeriGas Finance Corp. and AmeriGas Finance LLC, wholly owned finance subsidiaries of AmeriGas Partners (the “Issuers”), of $550 principal amount of 6.75% Senior Notes due May 2020 (the “6.75% Notes”) and $1,000 principal amount of 7.00% Senior Notes due May 2022 (the “7.00% Notes”). For further information on the 6.75% Notes and the 7.00% Notes, see Note 10.

The Condensed Consolidated Balance Sheet at June 30, 2012 reflects a preliminary allocation of the purchase price to the assets acquired and liabilities assumed. The purchase price paid comprises AmeriGas Partners Common Units issued having a fair value of $1,132.6, and total net cash consideration of $1,472.2 including cash acquired of $60.7. The Partnership is in the process of obtaining information required to determine the fair values of certain assets and liabilities acquired, principally long-term intangible and tangible assets. The Partnership expects to finalize these amounts by the end of fiscal 2012. The preliminary purchase price allocation is as follows:
Assets acquired:
 
Current assets
$
280.3

Property, plant & equipment
890.5

Customer relationships (estimated useful life of 15 years)
418.9

Trademarks and tradenames
144.2

Goodwill
1,167.5

Other assets
10.4

Total assets acquired
$
2,911.8

 
 
Liabilities assumed:
 
Current liabilities
$
(223.5
)
Long-term debt
(61.6
)
Other noncurrent liabilities
(21.9
)
Total liabilities assumed
$
(307.0
)
Total
$
2,604.8

Goodwill associated with the Heritage Acquisition principally results from synergies expected from combining the operations and from assembled workforce. The tax effects of such goodwill will be realized over a fifteen-year period.

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Table of Contents
UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)

Transaction expenses associated with the Heritage Acquisition, which are included in operating and administrative expenses on the Condensed Consolidated Statements of Income, totaled $0.5 and $5.3 for the three and nine months ended June 30, 2012, respectively. The results of operations of Heritage Propane are included in the Condensed Consolidated Statements of Income since the Acquisition Date. As a result of achieving planned strategic operating and marketing milestones, it is impracticable to determine the impact of the Heritage Propane operations on the revenues and earnings of the Company.
The following presents unaudited pro forma income statement and earnings per share data as if the Heritage Acquisition had occurred on October 1, 2010:

 
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
 
2012 (As Reported)
 
2011
 
2012
 
2011
Revenues
 
$
1,277.2

 
$
1,335.6

 
$
5,885.2

 
$
6,257.8

Net (loss) income attributable to UGI Corporation
 
$
(6.3
)
 
$
(14.0
)
 
$
211.4

 
$
253.9

(Loss) earnings per common share attributable to UGI Corporation stockholders:
 
 
 
 
 
 
 
 
Basic
 
$
(0.06
)
 
$
(0.12
)
 
$
1.88

 
$
2.28

Diluted
 
$
(0.06
)
 
$
(0.12
)
 
$
1.87

 
$
2.25

The unaudited pro forma results of operations reflect Heritage Propane’s historical operating results after giving effect to adjustments directly attributable to the transaction that are expected to have a continuing effect. The unaudited pro forma consolidated results of operations are not necessarily indicative of the results that would have occurred had the Heritage Acquisition occurred on the date indicated nor are they necessarily indicative of future operating results.
In accordance with the Contribution Agreement, ETP and the Partnership entered into a transition services agreement and ETP, HPX and the Partnership also entered into a transition services agreement, (collectively, the “TSA”) whereby each party may be a provider and receiver of certain services to the other. The principal services include general business continuity, information technology, accounting, tax and administrative services. Services under the TSA will be provided through the expiration of the term relating to each service or until such time as mutually agreed by the parties. Amounts associated with such services were not material.
 
5.
Goodwill and Intangible Assets

The Company’s intangible assets comprise the following:
 
 
 
June 30,
2012
 
September 30,
2011
 
June 30,
2011
Goodwill (not subject to amortization)
 
$
2,756.0

 
$
1,562.2

 
$
1,612.0

Intangible assets:
 
 
 
 
 
 
Customer relationships, noncompete agreements and other
 
$
689.3

 
$
232.1

 
$
240.6

Trademarks and tradenames (not subject to amortization)
 
189.6

 
47.9

 
51.9

Gross carrying amount
 
878.9

 
280.0

 
292.5

Accumulated amortization
 
(161.2
)
 
(132.2
)
 
(133.0
)
       Intangible assets, net
 
$
717.7

 
$
147.8

 
$
159.5

The increases in goodwill and intangible assets during the nine months ended June 30, 2012 principally reflect the effects of the Heritage Acquisition and, to a much lesser extent, the Shell Acquisition. Amortization expense of intangible assets was $12.4 and $31.2 for the three and nine months ended June 30, 2012, respectively, and $5.4 and $15.1 for the three and nine months ended June 30, 2011, respectively. No amortization is included in cost of sales in the Condensed Consolidated Statements of Income. As of June 30, 2012, our expected aggregate amortization expense of intangible assets for the remainder of Fiscal 2012 and for the next four fiscal years is as follows: remainder of Fiscal 2012$12.8; Fiscal 2013

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Table of Contents
UGI CORPORATION AND SUBSIDIARIES

$51.1; Fiscal 2014$49.8; Fiscal 2015$47.6; Fiscal 2016$45.4.


- 10 -

Table of Contents
UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)

6.
Segment Information

We have organized our business units into six reportable segments generally based upon products sold, geographic location (domestic or international) or regulatory environment. Our reportable segments are: (1) AmeriGas Propane; (2) an international LPG segment comprising Antargaz; (3) an international LPG segment comprising Flaga, our propane distribution business in the United Kingdom and our propane distribution business in China (“Flaga & Other”); (4) Gas Utility; (5) Electric Utility; and (6) Midstream & Marketing. We refer to both international segments collectively as “International Propane.”
The accounting policies of our reportable segments are the same as those described in Note 2, “Significant Accounting Policies” in the Company’s 2011 Annual Financial Statements and Notes. We evaluate AmeriGas Propane’s performance principally based upon the Partnership’s earnings before interest expense, income taxes, depreciation and amortization (“Partnership EBITDA”). Although we use Partnership EBITDA to evaluate AmeriGas Propane’s profitability, it should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations) and is not a measure of performance or financial condition under GAAP. Our definition of Partnership EBITDA may be different from that used by other companies. We evaluate the performance of our International Propane, Gas Utility, Electric Utility and Midstream & Marketing segments principally based upon their income before income taxes.

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Table of Contents
UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)


Three Months Ended June 30, 2012:
 
 
 
 
 
 
 
 
Reportable Segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International Propane
 
 
 
 
Total
 
Elims.
 
 
AmeriGas
Propane
 
Gas
Utility
 
Electric
Utility
 
Midstream &
Marketing
 
Antargaz
 
Flaga &
Other (b)
 
Corporate
& Other (c)
Revenues
 
$
1,277.2

 
$
(32.2
)
(d)
 
$
571.9

 
$
122.3

 
$
20.8

 
$
166.7

 
$
211.8

 
$
193.4

 
$
22.5

Cost of sales
 
$
810.2

 
$
(30.9
)
(d)
 
$
334.0

 
$
51.4

 
$
11.3

 
$
145.2

 
$
133.6

 
$
153.0

 
$
12.6

Segment profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating (loss) income
 
$
(19.2
)
 
$

 
 
$
(48.4
)
 
$
22.5

 
$
2.6

 
$
4.9

 
$
(1.2
)
 
$
2.4

 
$
(2.0
)
Loss from equity investees
 
(0.1
)
 

 
 

 

 

 

 
(0.1
)
 

 

Gain on extinguishments of debt
 
0.1

 

 
 
0.1

 

 

 

 

 

 

Interest expense
 
(61.3
)
 

 
 
(41.8
)
 
(9.9
)
 
(0.6
)
 
(1.2
)
 
(6.3
)
 
(1.2
)
 
(0.3
)
(Loss) income before income taxes
 
$
(80.5
)
 
$

 
 
$
(90.1
)
 
$
12.6

 
$
2.0

 
$
3.7

 
$
(7.6
)
 
$
1.2

 
$
(2.3
)
Partnership EBITDA (a)
 
 
 
 
 
 
$
1.8

 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests’ net loss
 
$
(70.2
)
 
$

 
 
$
(70.0
)
 
$

 
$

 
$

 
$
(0.2
)
 
$

 
$

Depreciation and amortization
 
$
84.6

 
$

 
 
$
49.5

 
$
12.3

 
$
0.9

 
$
3.2

 
$
13.5

 
$
4.7

 
$
0.5

Capital expenditures
 
$
83.7

 
$

 
 
$
25.2

 
$
29.0

 
$
0.9

 
$
13.6

 
$
12.0

 
$
2.8

 
$
0.2

Total assets (at period end)
 
$
9,652.2

 
$
(87.4
)
 
 
$
4,579.5

 
$
2,027.0

 
$
158.8

 
$
616.3

 
$
1,664.7

 
$
513.2

 
$
180.1

Bank loans (at period end)
 
$
187.3

 
$

 
 
$
68.8

 
$

 
$

 
$
95.0

 
$

 
$
23.5

 
$

Goodwill (at period end)
 
$
2,756.0

 
$

 
 
$
1,866.7

 
$
182.1

 
$

 
$
2.8

 
$
605.0

 
$
92.4

 
$
7.0


- 12 -

Table of Contents
UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)


Three Months Ended June 30, 2011:
 
 
 
 
 
 
 
 
Reportable Segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International Propane
 
 
 
 
Total
 
Elims.
 
 
AmeriGas
Propane
 
Gas
Utility
 
Electric
Utility
 
Midstream &
Marketing
 
Antargaz
 
Flaga &
Other (b)
 
Corporate
& Other (c)
Revenues
 
$
1,105.4

 
$
(40.0
)
(d)
 
$
470.8

 
$
148.1

 
$
24.1

 
$
217.1

 
$
161.0

 
$
102.3

 
$
22.0

Cost of sales
 
$
731.0

 
$
(39.1
)
(d)
 
$
300.8

 
$
78.8

 
$
14.6

 
$
193.1

 
$
95.3

 
$
74.6

 
$
12.9

Segment profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
17.2

 
$

 
 
$
6.7

 
$
17.2

 
$
2.4

 
$
8.4

 
$
(11.4
)
 
$
(3.6
)
 
$
(2.5
)
Loss from equity investees
 
(0.2
)
 

 
 

 

 

 

 
(0.2
)
 

 

Loss on extinguishments of debt
 

 

 
 

 

 

 

 

 

 

Interest expense
 
(35.0
)
 

 
 
(15.7
)
 
(9.9
)
 
(0.7
)
 
(0.6
)
 
(7.1
)
 
(0.8
)
 
(0.2
)
(Loss) income before income taxes
 
$
(18.0
)
 
$

 
 
$
(9.0
)
 
$
7.3


$
1.7

 
$
7.8

 
$
(18.7
)
 
$
(4.4
)
 
$
(2.7
)
Partnership EBITDA (a)
 
 
 
 
 
 
$
31.1

 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests’ net loss
 
$
(6.3
)
 
$

 
 
$
(6.1
)
 
$

 
$

 
$

 
$
(0.2
)
 
$

 
$

Depreciation and amortization
 
$
57.8

 
$

 
 
$
24.5

 
$
11.6

 
$
1.1

 
$
1.8

 
$
13.5

 
$
4.7

 
$
0.6

Capital expenditures
 
$
78.5

 
$

 
 
$
18.6

 
$
20.9

 
$
1.0

 
$
18.7

 
$
12.0

 
$
6.6

 
$
0.7

Total assets (at period end)
 
$
6,673.7

 
$
(81.0
)
 
 
$
1,772.1

 
$
2,002.0

 
$
156.5

 
$
572.2

 
$
1,678.2

 
$
407.3

 
$
166.4

Bank loans (at period end)
 
$
206.1

 
$

 
 
$
176.0

 
$

 
$

 
$

 
$

 
$
30.1

 
$

Goodwill (at period end)
 
$
1,612.0

 
$

 
 
$
695.8

 
$
180.1

 
$

 
$
2.8

 
$
641.1

 
$
85.3

 
$
6.9

(a)
The following table provides a reconciliation of Partnership EBITDA to AmeriGas Propane operating income (loss):
Three Months Ended June 30,
 
2012
 
2011
Partnership EBITDA (ii)
 
$
1.8

 
$
31.1

Depreciation and amortization
 
(49.5
)
 
(24.5
)
Gain on extinguishments of debt
 
(0.1
)
 

Noncontrolling interests (i)
 
(0.6
)
 
0.1

Operating (loss) income
 
$
(48.4
)
 
$
6.7


(i)
Principally represents the General Partner’s 1.01% interest in AmeriGas OLP.

- 13 -

Table of Contents
UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)

(ii)
Includes $0.1 gain associated with extinguishments of Partnership debt in 2012.
(b)
International Propane—Flaga & Other principally comprises Flaga’s retail distribution businesses, our propane distribution business in China and our propane distribution business in the United Kingdom.
(c)
Corporate & Other results principally comprise HVAC/R, net expenses of UGI’s captive general liability insurance company and UGI Corporation’s unallocated corporate and general expenses and interest income. Corporate & Other assets principally comprise cash, short-term investments, assets of HVAC/R and an intercompany loan. The intercompany loan and associated interest is removed in the segment presentation.
(d)
Principally represents the elimination of intersegment transactions among Midstream & Marketing, Gas Utility and AmeriGas Propane.

 
Nine Months Ended June 30, 2012:
 
 
 
 
 
 
 
 
Reportable Segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International Propane
 
 
 
 
Total
 
Elims.
 
 
AmeriGas
Propane
 
Gas
Utility
 
Electric
Utility
 
Midstream &
Marketing
 
Antargaz
 
Flaga &
Other (b)
 
Corporate
& Other (c)
Revenues
 
$
5,393.5

 
$
(129.1
)
(d)
 
$
2,411.3

 
$
696.8

 
$
71.9

 
$
674.5

 
$
958.7

 
$
646.5

 
$
62.9

Cost of sales
 
$
3,438.6

 
$
(125.6
)
(d)
 
$
1,447.8

 
$
370.6

 
$
41.8

 
$
565.6

 
$
597.9

 
$
506.3

 
$
34.2

Segment profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
549.9

 
$

 
 
$
206.7

 
$
168.7

 
$
9.2

 
$
59.4

 
$
96.3

 
$
16.8

 
$
(7.2
)
Loss from equity investees
 
(0.2
)
 

 
 

 

 

 

 
(0.2
)
 

 

Loss on extinguishments of debt
 
(13.3
)
 

 
 
(13.3
)
 

 

 

 

 

 

Interest expense
 
(162.6
)
 

 
 
(103.4
)
 
(30.1
)
 
(1.7
)
 
(3.6
)
 
(19.7
)
 
(3.4
)
 
(0.7
)
Income (loss) before income taxes
 
$
373.8

 
$

 
 
$
90.0

 
$
138.6

 
$
7.5

 
$
55.8

 
$
76.4

 
$
13.4

 
$
(7.9
)
Partnership EBITDA (a)
 
 
 
 
 
 
$
310.0

 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests’ net income
 
$
46.5

 
$

 
 
$
46.2

 
$

 
$

 
$

 
$
0.3

 
$

 
$

Depreciation and amortization
 
$
227.7

 
$

 
 
$
118.5

 
$
36.6

 
$
2.8

 
$
9.0

 
$
42.6

 
$
16.6

 
$
1.6

Capital expenditures
 
$
237.7

 
$

 
 
$
70.3

 
$
76.5

 
$
3.2

 
$
47.6

 
$
28.0

 
$
11.5

 
$
0.6

Total assets (at period end)
 
$
9,652.2

 
$
(87.4
)
 
 
$
4,579.5

 
$
2,027.0

 
$
158.8

 
$
616.3

 
$
1,664.7

 
$
513.2

 
$
180.1

Bank loans (at period end)
 
$
187.3

 
$

 
 
$
68.8

 
$

 
$

 
$
95.0

 
$

 
$
23.5

 
$

Goodwill (at period end)
 
$
2,756.0

 
$

 
 
$
1,866.7

 
$
182.1

 
$

 
$
2.8

 
$
605.0

 
$
92.4

 
$
7.0


- 14 -

Table of Contents
UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)

Nine Months Ended June 30, 2011:
 
 
 
 
 
 
 
 
Reportable Segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International Propane
 
 
 
 
Total
 
Elims.
 
 
AmeriGas
Propane
 
Gas
Utility
 
Electric
Utility
 
Midstream &
Marketing
 
Antargaz
 
Flaga &
Other (b)
 
Corporate
& Other (c)
Revenues
 
$
5,052.0

 
$
(172.9
)
(d)
 
$
2,077.8

 
$
921.7

 
$
84.7

 
$
857.0

 
$
889.7

 
$
332.4

 
$
61.6

Cost of sales
 
$
3,317.5

 
$
(170.3
)
(d)
 
$
1,300.9

 
$
562.3

 
$
53.4

 
$
738.6

 
$
554.0

 
$
243.8

 
$
34.8

Segment profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
$
626.5

 
$
0.2

 
 
$
252.9

 
$
193.2

 
$
9.0

 
$
76.7

 
$
101.0

 
$
(0.2
)
 
$
(6.3
)
Loss from equity investees
 
(0.8
)
 

 
 

 

 

 

 
(0.8
)
 

 

Loss on extinguishments of debt
 
(18.8
)
 

 
 
(18.8
)
 

 

 

 

 

 

Interest expense
 
(102.6
)
 

 
 
(47.4
)
 
(30.2
)
 
(1.8
)
 
(2.0
)
 
(18.5
)
 
(2.1
)
 
(0.6
)
Income (loss) before income taxes
 
$
504.3

 
$
0.2

 
 
$
186.7

 
$
163.0

 
$
7.2

 
$
74.7

 
$
81.7

 
$
(2.3
)
 
$
(6.9
)
Partnership EBITDA (a)
 
 
 
 
 
 
$
301.9

 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests’ net income
 
$
101.8

 
$

 
 
$
101.2

 
$

 
$

 
$

 
$
0.6

 
$

 
$

Depreciation and amortization
 
$
168.6

 
$

 
 
$
70.4

 
$
36.1

 
$
3.1

 
$
5.4

 
$
38.4

 
$
13.7

 
$
1.5

Capital expenditures
 
$
246.1

 
$

 
 
$
59.2

 
$
54.5

 
$
5.1

 
$
81.5

 
$
31.8

 
$
12.6

 
$
1.4

Total assets (at period end)
 
$
6,673.7

 
$
(81.0
)
 
 
$
1,772.1

 
$
2,002.0

 
$
156.5

 
$
572.2

 
$
1,678.2

 
$
407.3

 
$
166.4

Bank loans (at period end)
 
$
206.1

 
$

 
 
$
176.0

 
$

 
$

 
$

 
$

 
$
30.1

 
$

Goodwill (at period end)
 
$
1,612.0

 
$

 
 
$
695.8

 
$
180.1

 
$

 
$
2.8

 
$
641.1

 
$
85.3

 
$
6.9

(a)
The following table provides a reconciliation of Partnership EBITDA to AmeriGas Propane operating income:
Nine Months Ended June 30,
 
2012
 
2011
Partnership EBITDA (ii)
 
$
310.0

 
$
301.9

Depreciation and amortization
 
(118.5
)
 
(70.4
)
Loss on extinguishment of debt
 
13.3

 
18.8

Noncontrolling interests (i)
 
1.9

 
2.6

Operating income
 
$
206.7

 
$
252.9

(i)
Principally represents the General Partner’s 1.01% interest in AmeriGas OLP.
(ii)
Includes $13.3 loss and $18.8 loss, respectively, associated with extinguishments of Partnership debt.
(b)
International Propane—Flaga & Other principally comprises Flaga’s retail distribution businesses, our propane distribution business in China and our propane

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UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)

distribution business in the United Kingdom.
(c)
Corporate & Other results principally comprise HVAC/R, net expenses of UGI’s captive general liability insurance company and UGI Corporation’s unallocated corporate and general expenses and interest income. Corporate & Other assets principally comprise cash, short-term investments, assets of HVAC/R and an intercompany loan. The intercompany loan and associated interest is removed in the segment presentation.
(d)
Principally represents the elimination of intersegment transactions among Midstream & Marketing, Gas Utility and AmeriGas Propane.


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UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)

7.
Energy Services Accounts Receivable Securitization Facility

Energy Services has a $200 receivables purchase facility (“Receivables Facility”) with an issuer of receivables-backed commercial paper currently scheduled to expire in April 2013, although the Receivables Facility may terminate prior to such date due to the termination of commitments of the Receivables Facility back-up purchasers.
Under the Receivables Facility, Energy Services transfers, on an ongoing basis and without recourse, its trade accounts receivable to its wholly owned, special purpose subsidiary, Energy Services Funding Corporation (“ESFC”), which is consolidated for financial statement purposes. ESFC, in turn, has sold, and subject to certain conditions, may from time to time sell, an undivided interest in some or all of the receivables to a commercial paper conduit of a major bank. ESFC was created and has been structured to isolate its assets from creditors of Energy Services and its affiliates, including UGI. Energy Services continues to service, administer and collect trade receivables on behalf of the commercial paper issuer and ESFC. Trade receivables sold to the commercial paper conduit remain on the Company’s balance sheet; the Company reflects a liability equal to the amount advanced by the commercial paper conduit; and the Company records interest expense on amounts sold to the commercial paper conduit.
During the nine months ended June 30, 2012 and 2011, Energy Services transferred trade receivables to ESFC totaling $674.4 and $923.5, respectively. During the nine months ended June 30, 2012 and 2011, ESFC sold an aggregate $266.5 and $68.0, respectively, of undivided interests in its trade receivables to the commercial paper conduit. At June 30, 2012, the balance of ESFC receivables was $41.0 and there was $10.0 sold to the commercial paper conduit. At June 30, 2011, the outstanding balance of ESFC receivables was $50.9 and there were no amounts sold to the commercial paper conduit.

8.
Utility Regulatory Assets and Liabilities and Regulatory Matters

For a description of the Company’s regulatory assets and liabilities other than those described below, see Note 8 to the Company’s 2011 Annual Financial Statements and Notes. UGI Utilities does not recover a rate of return on its regulatory assets. The following regulatory assets and liabilities associated with Gas Utility and Electric Utility are included in our accompanying Condensed Consolidated Balance Sheets:

 
 
June 30,
2012
 
September 30,
2011
 
June 30,
2011
Regulatory assets:
 
 
 
 
 
 
Income taxes recoverable
 
$
99.9

 
$
97.9

 
$
92.7

Underfunded pension and postretirement plans
 
144.6

 
150.7

 
116.0

Environmental costs
 
16.6

 
19.5

 
20.7

Deferred fuel and power costs
 
9.8

 
12.2

 
7.8

Removal costs, net
 
11.8

 
12.3

 
11.2

Other
 
8.3

 
7.8

 
8.9

Total regulatory assets
 
$
291.0

 
$
300.4

 
$
257.3

Regulatory liabilities:
 
 
 
 
 
 
Postretirement benefits
 
$
12.3

 
$
11.5

 
$
11.6

Environmental overcollections
 
3.7

 
4.7

 
6.2

Deferred fuel and power refunds
 
10.3

 
6.6

 
22.4

State tax benefits—distribution system repairs
 
7.0

 
6.3

 
6.2

Other
 
0.7

 
0.7

 

Total regulatory liabilities
 
$
34.0

 
$
29.8

 
$
46.4

Deferred fuel and power—costs and refunds. Gas Utility’s tariffs and Electric Utility’s tariffs contain clauses which permit recovery of all prudently incurred purchased gas and power costs through the application of purchased gas cost (“PGC”) rates in the case of Gas Utility and default service (“DS”) rates in the case of Electric Utility. The clauses provide

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UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)

for periodic adjustments to PGC and DS rates for differences between the total amount of purchased gas and electric generation supply costs collected from customers and recoverable costs incurred. Net undercollected costs are classified as a regulatory asset and net overcollected costs are classified as a regulatory liability.
Gas Utility uses derivative financial instruments to reduce volatility in the cost of natural gas it purchases for firm- residential, commercial and industrial (“retail core-market”) customers. Realized and unrealized gains or losses on natural gas derivative financial instruments are included in deferred fuel costs or refunds. Unrealized gains (losses) on such contracts at June 30, 2012September 30, 2011 and June 30, 2011 were $0.3, $(3.1) and $(1.1), respectively.
Electric Utility enters into forward electricity purchase contracts to meet a substantial portion of its electricity supply needs. During Fiscal 2010, Electric Utility determined that it could no longer assert that it would take physical delivery of substantially all of the electricity it had contracted for under its forward power purchase agreements and, as a result, such contracts no longer qualified for the normal purchases and normal sales exception related to derivative financial instruments. As a result, Electric Utility’s electricity supply contracts are required to be recorded on the balance sheet at fair value with an associated adjustment to regulatory assets or liabilities in accordance with Electric Utility’s DS recovery mechanism. At June 30, 2012September 30, 2011 and June 30, 2011, the fair values of Electric Utility’s electricity supply contracts were losses of $13.1, $8.7 and $10.1, respectively, which amounts are reflected in current derivative financial instrument liabilities and other noncurrent liabilities on the Condensed Consolidated Balance Sheets with equal and offsetting amounts reflected in deferred fuel and power costs in the table above.
 
In order to reduce volatility associated with a substantial portion of its electric transmission congestion costs, Electric Utility obtains financial transmission rights (“FTRs”). FTRs are derivative financial instruments that entitle the holder to receive compensation for electricity transmission congestion charges when there is insufficient electricity transmission capacity on the electric transmission grid. Because Electric Utility is entitled to fully recover its DS costs, realized and unrealized gains or losses on FTRs are included in deferred fuel and power—costs or refunds. Unrealized gains on FTRs at June 30, 2012September 30, 2011 and June 30, 2011 were not material.

Distribution System Improvement Charge. On April 14, 2012, legislation enabling gas and electric utilities in Pennsylvania to seek surcharge recovery of eligible capital investment in distribution system infrastructure improvement projects became effective. The surcharge enabled by the legislation is known as a distribution system improvement charge (“DSIC”). The primary benefit to a company from a DSIC surcharge is the elimination of regulatory lag, or delayed rate recognition, that occurs under traditional ratemaking relating to qualifying capital expenditures, for up to five percent of distribution rates. To be eligible for a DSIC, a utility must have filed a general rate filing within five years of its petition seeking permission to include a DSIC in its tariff. We are currently evaluating the potential effect of this legislation on our four regulated utilities. Filings to implement a DSIC surcharge may be filed no earlier than January 2, 2013.
 
9.
Defined Benefit Pension and Other Postretirement Plans

In the U.S., we currently sponsor one defined benefit pension plan for employees hired prior to January 1, 2009 of UGI, UGI Utilities, PNG, CPG and certain of UGI’s other domestic wholly owned subsidiaries (“Pension Plan”). We also provide postretirement health care benefits to certain retirees and a limited number of active employees, and postretirement life insurance benefits to nearly all domestic active and retired employees. In addition, Antargaz employees are covered by certain defined benefit pension and postretirement plans.
 
Net periodic pension expense and other postretirement benefit costs include the following components:
 

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Table of Contents
UGI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Millions of dollars and euros, except per share amounts)

 
 
Pension Benefits
 
Other
Postretirement Benefits
 
 
Three Months Ended June 30,
 
Three Months Ended June 30,
 
 
2012
 
2011
 
2012
 
2011
Service cost
 
$
2.1

 
$
2.1

 
$
0.1

 
$
0.1

Interest cost
 
6.1

 
6.1

 
0.2

 
0.3

Expected return on assets
 
(6.4
)
 
(6.4
)
 
(0.1
)